UK could further complicate new Europe crisis deal

LONDON — The British government was weighing on Monday how strongly to oppose a new European pact — meant to ease the euro crisis — that it had refused to join but which could clash with the existing EU treaty.

Prime Minister David Cameron was the only leader among the 27 members of the European Union to refuse last week to consider a plan which would see nations submit their budgets for central review and limit the deficits they can run.

Cameron's veto threatens to leave Britain isolated on the fringes of the EU, while the 17 countries which use the euro currency — and almost all their neighbors — agree to consider a new treaty to enforce deeper political and economic bonds.

But Cameron's government is worried that the new pact would overlap with the existing EU treaty that Britain is part of already. In particular, Cameron's office said it was not clear how EU institutions such as the European Commission, the EU's executive based in Brussels, could be used under two different treaties.

"There are issues that are raised by this, about institutions serving two masters — the euro zone and the European Union — and we need to look at those issues very carefully," Cameron's spokesman Steve Field told reporters.

"If you have the institutions serving the 27 and serving the 17, there is potential for conflict of interest," he said.

Blocking the use of the existing EU institutions — their bureaucracies and their buildings — from use in the new treaty would complicate the new deal's implementation.

Field said discussions over how the deal is set up are likely to continue for many weeks. "What is very clear from the European Union treaty is that the institutions should not do anything that cuts across in any way the single market," he said.

A European Commission official, who declined to be named in line with the institution's policy, said it was likely that all 27 members of the EU would need to approve the use of EU institutions for the new agreement.

It means implementation of new budgetary rules and enforcement will be more complex, and potentially gives Britain another bargaining chip as its seeks to protect its financial sector.

Cameron said last week he was unable to agree to a deal because other nations couldn't agree to safeguards for Britain's financial services sector — the country's economic kingpin.

Field told reporters in London on Monday that Britain would continue to defend its financial services industry, and would resume talks among European finance ministers aimed at agreeing exceptions that would allow the U.K. to implement more sweeping banking sector reforms than European laws currently permit.

Cameron was scheduled to address lawmakers in London on Monday on his decision to snub the deal aimed at saving the eurozone.

Despite some sharp criticism from Britain's deputy prime minister Nick Clegg, leader of the pro-European Liberal Democrats, ministers insisted Monday there was no risk of the country's coalition government collapsing.

Clegg, whose Liberal Democrats are junior partners to Cameron's Conservatives in Britain's coalition, warned that Britain now risked being "a pygmy in the world," and isolated from key decisions.

"This doesn't threaten the coalition. The coalition was formed to deal with the enormous economic problems that we inherited as a country. That task is the central task of this government," Alexander told BBC radio.

Others insisted that Britain wasn't moving toward an eventual withdrawal from the EU.

"I don't see it as a break up of the EU. I see it as an extra complication for the EU," said Vivien Schmidt, a professor of international relations at Boston University in Massachusetts. "What this does do is marginalize Britain, but in a way this is not such a bad thing, if all it's going to do is veto and poison debate among the other member-states."

French President Nicolas Sarkozy has blamed Cameron for the political rift between Britain and the rest of the EU.

"There are clearly two Europes," Sarkozy was quoted as telling Le Monde newspaper on Monday. "One that wants more solidarity among its members and more regulation. The other which is attached only to the logic of the single market."

Sarkozy said the new deal was a decisive step forward. "To this end, it creates the conditions for a rebound and an exit from the crisis," he said.